RealClearPolitics - Articles - Patrick Poole

By the year 2000, however, McWherter was long gone and TennCare was now the problem of the hapless Republican, Gov. Don Sundquist. Just days after Sundquist's successful 1999 reelection campaign came to a close, during which he had repeatedly vowed never to consider instituting a state income tax, his fiscal advisors broke the sad news that the state was going broke as a result of TennCare. The program had become the line item that had consumed the state budget - ballooning more than 200 percent in less than six years.
When the Tennessee Democrats began the TennCare program the intent was, much like Gov. Schwarzenegger's proposal, to make sure that the state's uninsured and those who were uninsurable had health care coverage. Almost immediately, the ranks of the uninsured exploded as employers dropped at-risk employees or eliminated their plans altogether, effectively shifting the risk or the entire cost of employees' health care to taxpayers. In short order, one quarter of the state's population was on TennCare.
Of course, TennCare had the full backing of Tennessee's health insurance companies, who also had their risk covered as they employees they lost through their corporate policies came right back as TennCare enrollees. In fact, the largest insurer in the state, Blue Cross/Blue Shield of Tennessee, was openly selling uninsurable letters to anyone with any remotely identifiable risk for $25 - all with the awareness and approval of state authorities.
When things came crashing down with TennCare during the 2000 legislative session, I was able to witness the spectacle first-hand. At the time, I was a policy analyst for the Tennessee Institute for Public Policy, and the state budget was one my issues I covered. Almost daily, news stories would run about the rampant fraud within TennCare - enrollees living in a Trump Tower penthouse in Florida, Fortune 500 CEOs flying their ailing children to Tennessee on their private planes to get qualified for TennCare and to receive organ transplants, and thousands of enrollees whose only connection to Tennessee was a P.O. box located in one of the many border cities around the state. One TennCare director confessed during a legislative hearing that the department estimated that one-quarter of enrollees (250,000+) were fraudulent or didn't actually qualify for the program. Needless to say, in the matter of weeks that TennCare director was out of a job.
Fraud, however, wasn't the only issue. The financial savings promised by Al Gore and the Clinton Administration were supposed to come from the implementation of managed care within the program. But as soon as TennCare was launched, liberal "public advocacy" groups waged a litigation campaign to force the state to cover more under the program. By 2000, the benefits under TennCare were so generous as a result of court-orders (many agreed to by the state) that one could not find a private insurance policy with such extensive coverage no matter how much you had available to spend. Managed care simply didn't exist, and neither did the promised savings. And anytime the state tried to get the cheats and free-riders off the program, the same liberal "public advocacy" groups successfully sued to prevent the state from eliminating them from the TennCare rolls.
The state, however, didn't bear the entire brunt of TennCare: hospitals and doctors also bore a large part of the costs associated with Tennessee's universal health care experiment. In the first six years of TennCare, a dozen hospitals had closed around the state - all of them in underserved areas. Physicians were leaving the state in droves. And as the quality of health care continued to decline for all Tennesseans, taxpayers were getting stuck with the bill.
But rather than address the 800-pound gorilla sitting in the corner of the smoke-filled hearing rooms at Legislative Plaza, Gov. Sundquist and the Democratic legislative leaders settled on the easiest way to deal with the problem - a state income tax (Tennessee being one of the few states without one). This proposal was met with[...]